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Demarcation of Compensations in Accidents- National Insurance Co. Ltd. v. Pranay Sethi


National Insurance Co. Ltd. v. Pranay Sethi, Special Leave Petition 25590 of 2014 [Supreme Court] is a case that opened up the new dimensions of demarcation of compensations in accidents. It cannot be negated that due to the lack of standardising the method of calculating compensation, the likelihood of unjust and unfair outcomes increases. This very case also established the guidelines on the fixation of future prospects in cases of motor accidents for those victims who are receiving a fixed salary, permanently employed or self-employed.


Due to the deviations in the judgements in Reshma Kumari v. Madan Mohan and Rajesh and others v. Rajbir Singh. In National Insurance Company Limited v. Pushpa, a two-Judge Bench of this Court thought it suitable to refer the matter to a larger Bench for an authoritative pronouncement. Thus, National Insurance Co. Ltd. v. Pranay Sethi was the case with the larger bench of 5 judges.


In this case, the bench comprised of 5 judges which are as follows:

  • Justice Dipak Misra

  • Justice A.K. Sikri

  • Justice A.M. Khanwilkar

  • Justice Dr D.Y. Chandrachud

  • Ashok Bhushan


This landmark judgement came on 31st October 2017 and cleared the previous deviations in judgements on compensations under motor vehicle act. After analysing the decision in Sarla Verma v Delhi transport Corporation, the Court concurred with the view therein regarding the standardisation of the addition to income towards “future prospects” in accordance with Section 168 of the Motor Vehicles Act 1988. In this case, it was also observed that the concept of "just compensation" has to be determined on the foundation of fairness, reasonableness and equitability on acceptable legal standards since such determination "can never be in arithmetical exactitude".

Prior Positions

In Sarla Verma Case, the Court decided and made a standard that half of the real pay could be included if the perished had a changeless activity and if the age of the expired was between 40-50 years. No expansion was to be made if the perished was over 50 years. Further, they decided that where the perished was independently employed or had a fixed compensation (without the arrangement for yearly addition), courts would take just the genuine pay at the hour of death. A takeoff from this standard was passable just in uncommon and remarkable cases including extraordinary conditions.

Before the Sarla Verma choice, the training was to grant half of the last attracted pay as pay deadly mishap claims. In this manner, the figuring table set down in Sarla Verma containing fixed rates based on various age bunches was followed for computing future possibilities for perpetual jobholders.

It was this restraint outline between for all time utilized people inside the available range, and the other classification where the perished were independently employed or utilized on fixed compensation, which was investigated in the current case.


The Court has decided the material rates for assurance of future prospects, if there should arise an occurrence of perished with a perpetual activity, and has additionally included the classification where the expired was self-employed or on fixed pay, to be as per the following:

Addition made to Deceased with Permanent Job

  • <40 years-50%

  • 40-50 years-30%

  • 50-60 years-15%

Addition made to Deceased who is Self-employed or on a fixed salary

  • <40 years-40%

  • 40-50 years-25%

  • 50-60 years-10%

Effect of judgement

As stated above too that this judgement provided very clear demarcation in Compensatory provisions of motor vehicle act. This judgement became the base in awarding compensations. In a recent judgement of Triveni Kodkany vs Air India Ltd where the Supreme Court granted the largest compensation in an individual case related with the Air Crash in Mangalore which took place in 2010- Rs. 7,64,29,437.

Reasoning behind Judgement

This case was dealt with the reasoning of straitjacket demarcation between the permanently employed persons under the taxable range and another category where the deceased was self-employed or employed on a fixed salary without annual increments.

Drawbacks of the Judgement

Even though this judgement was the big step in the standardisation of compensation but still some aspects were untouched. Also, some of the provisions were not delineated enough as a result of which they created confusion. For example, with respect to the grant of compensation under the conventional head of 'Loss of Consortium', in the judgement of Pranay Sethi created confusion. It was clear that Hon'ble Court had expressly confined grant of compensation towards 'Loss of Consortium' only to wife. It appears that only reason supplied by the Hon'ble Court was that Schedule II of the Act confines the conventional head of 'Loss of Consortium' only to wife. It is submitted that the said reasoning does not hold good.


National Insurance Co. Ltd. v. Pranay Sethi, Special Leave Petition 25590 of 2014 [Supreme Court] is one of the most important cases for compensatory provisions. This case introduced calculation for victims between the ages of 50 to 60, which was not available previously under the guidelines laid down by Sarla Verma. The Court also laid down a computation criterion of a fixed percentage for the addition of the actual salary of a self-employed person or a person earning a fixed salary. the Court agreed to the "principle of standardization" so that "a specific and certain multiplicand is determined for applying the multiplier on the basis of age" for claims where the deceased had a permanent job.

In a nutshell, this case provided the clear-cut demarcations for compensations in accidents and this very case also opened new dimensions of standardising compensation which was untouched before this case.


Nagesh Pal Singh is currently pursuing Law from Jamia Milia Islamia.

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